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How USDC Enables DMM to Offer Predictable Yield

Team Circle Team Circle July 17, 2020

guest-author-rynes Zachary Rynes is an experienced community outreach consultant and avid researcher of the growing DeFi space. By kickstarting the growth of the DMM Ecosystem, permissionless access to a stable interest rate is now available to all.

USD Coin (USDC) has enabled a multitude of new and innovative use cases and decentralized applications that benefit from a digital US dollar that runs on public blockchains. USDC becomes particularly powerful when brought into the Decentralized Finance (DeFi) ecosystem to achieve expanded utility and permissionless yield. One such project leveraging the advantages of USDC is the DeFi Money Market (DMM).

DMM is a trust-minimized, transparent, and permissionless protocol built to bring interest-generating real world assets onto the Ethereum blockchain and DeFi. Users are able to earn 6.25% on USDC, DAI, and ETH assets through a simple user interface and other integrated dApps such as 1inch.exchange. DMM creates a gateway between the fragmented traditional financial system of today and the automated and reliable smart contract-based financial system of tomorrow. 

USDC effectively acts as an on-ramp / off-ramp for DMM, enabling anyone to earn competitive yield on their Dollar assets.

How does it work?

Users have to acquire USDC and hold the assets in a non-custodial wallet. They then deposit their USDC into the DMM ecosystem to receive mUSDC tokens and earn a stable return, backed by interest-generating real world assets. Since deposits are tokenized into mTokens, users can transfer their interest-generating mUSDC tokens to any other Ethereum wallet and even use it within existing DeFi applications. 

USDC can be kept within the DMM ecosystem for however long a user would like. Once they desire,  users can unwrap their mUSDC tokens back into their original USDC deposit plus interest earned. They can then swap their USDC to the crypto asset of their choice or even seamlessly exchange back into fiat currency. 

In the DMM Ecosystem, both the off-chain assets backing mTokens and the interest revenue generated from these assets are overcollateralized, in a design that aims to protect depositors. Being backed by a pool of real world assets also means mTokens can offer users a much more stable and reliable return on their deposited funds. Transparency into the off-chain assets backing mTokens can be found on the DMM Explorer.

By leveraging network effects of Ethereum and the stability of USDC, DMM brings predictable yield to anyone with just an internet connection and an Ethereum address. Supporting USDC means DMM enables users to earn a stable yield while not being exposed to volatile cryptocurrencies such as Bitcoin or Ether. Not only is USDC already one of the most liquid and popular stablecoins on the Ethereum blockchain and DMM ecosystem itself, but it also allows end users who hold fiat currency to easily enter and exit the ecosystem while keeping full exposure to the stability of the US dollar.

Additionally, by supporting deposits of USDC, DMM’s ecosystem is able to become larger and stronger than ever by providing seamless support for a popular stablecoin with hundreds of millions of dollars in liquidity. For the reasons mentioned above and more, USDC has grown to be the most adopted crypto asset within the DMM ecosystem at over $1.5M USDC in user deposits. 

The combination of USDC and DMM is in the process of supercharging adoption of DeFi by bridging the best of the traditional financial world with the best of the new smart contact driven financial world being built. The future of global stablecoin adoption looks bright indeed. For more information on the DeFi Money Market (DMM), check out the website and blog.